In Re Delphi Financial Group Shareholder Litigation

2012 WL 729232 (Del. Ch. Mar. 6, 2012)

Purchase the Printed Copy at bsmsphd.com

Nature of the Case

To access this section all you need to do is click here and register.

Facts

D is an insurance holding company founded by Rosenkranz. Rosenkranz took D public in 1990. There are two classes of stock, Class A, largely held by the public, and Class B, retained by Rosenkranz. Although Rosenkranz retained less than 13% of the shares outstanding, each share of Class B stock represented the right to ten votes in stockholder matters, while each share of Class A stock entitled the holder to one vote. A charter provision directed that, on sale of the company, each share of Class B stock would be converted to Class A, entitled to the same consideration as any other Class A stock. In 2011, Tokio Marine Holdings, Inc.(TMH), through an intermediary, contacted Rosenkranz about the possible purchase of D. Rosenkranz negotiated an offer of $46 a share. Rosenkranz also made it clear to D's board that, notwithstanding the charter provision, he would not consent to the sale without a premium paid for his Class B stock. D set up a committee of independent directors to negotiate a differential for the Class B stock. The Board also charged the Special Committee with representing the best interests of the Class A stockholders, granted the Special Committee full authority to take any action that would be available to the Board in connection with the transaction, and authorized the Special Committee to pursue and consider alternative transactions to the TMH bid if it deemed such alternatives to be of interest to the Class A stockholders. The committee was ultimately able to negotiate the per share price demanded by Rosenkranz from $59 down to $53.875. TMH was then informed that the deal would be structured to provide a differential: $44.875 per share for the Class A shares; $53.875 per share for the Class B shares. The deal was conditioned on a majority of the publicly held Class A shares being voted in favor, and a successful vote to amend the D Charter to allow Rosenkranz to receive the differential. Ps moved for a preliminary injunction to block the deal, in that Rosenkranz and the other directors breached fiduciary and contractual obligations. Ps alleged that Ds breached their fiduciary duties in their efforts to obtain the best price reasonably available to the stockholders, in violation of their fiduciary duties under the Revlon doctrine. Ps attack the negotiations between the Director Defendants (through the Sub-Committee) and Rosenkranz with respect to differential consideration. Ps allege that Ds breached their fiduciary duties to the Class A stockholders in approving the consideration differential.